I’m looking this morning at the March 15th tip of the day from Kim Komando. It’s a rather long article entitled Beware of debt management offers. She describes three different types of programs which one will find when running a Google search: 1) Debt negotiation, 2) debt consolidation, and 3) debt elimination. Personally I would like to add one more type: 4)debt management.

The third one – debt elimination – is always a scam. These are people who are trying to sell information that they claim is secret that you can use to make your debt just go away entirely. If anybody tells you they have that sort of a program, which sometimes is in the form of a magic form you can fill out and then send to the creditors, run away as fast as you can. There is no such program.

Debt negotiation or debt consolidation programs may or may not be legitimate. The Komando article suggests that you should make sure that any agency you use is licensed by your state and also accredited by one of two organizations, the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. I would also suggest that you make sure they are on the approved Department of Justice list for counseling programs acceptable for the pre-filing and post-filing credit counseling required by the bankruptcy statute. You can find a link to the Department of Justice list of approved bankruptcy counseling agencies on my web page at http://www.mn-bankruptcy.com/chapter7.html. At that page click on “Credit Counseling Requirement.”

My two favorite local places to go for real counseling are Lutheran Social Services and Family Means. Both have offices fairly close to my office. Both are non-profit. Both do debt management, my Item 4 on the above list. Debt management might involve negotiation, but not necessarily. They are not trying to make money out of your desperate situation. They are tying to figure out how to get you on a payment plan that will actually work. And if that is a hopeless idea for you, they will tell you and suggest that you talk to someone like me.

I find myself looking at a 32 page report, complete with colorful graphs and charts, written by a gentleman by the name of Michael Simkovic. Mr. Simkovic was a fellow in law and economics at Harvard Law School between 2006 and 2007. He published this report last July. His subject is the effect of the 2005 “Bankruptcy Abuse Prevention and Consumer Protection Act.” Many of us call that BAPCPA (pronounced “bapceepa“).

The report begins by reminding us that supporters had claimed that ultimately this law would benefit consumers, because it would lower the cost of credit card debt. The data shows, however, that while credit card company losses decreased, and the card companies had record profits, costs to consumers actually increased. “In other words,” says Mr. Simkovic, “the 2005 bankruptcy reform profited credit card companies at consumers’ expense.”

No big surprise there. But thanks to Mr. Simkovic for laying out the details and proving it beyond a reasonable doubt. This seems to be very consistent with a series of articles published in the Star Tribune last October which stated, among other things, that BAPCPA has been one of the contributors to our current economic meltdown.

“Enhanced” according to the old hard-bound dictionary on my desk means “to make greater” or to raise, intensify or heighten. It seems to be a term that is used a lot in connection with DWI. For example, if you have a second offense within ten years, that second offense is “enhanced” because of the first. Please remember that taxi cabs are really cheap compared to the cost of being arrested.

As I think I have mentioned earlier, I am noticing that the fact that one is considering or working on filing a bankruptcy seems to enhance to possibility of either being arrested for DWI or being injured in a serious accident. If you should happen to have bankruptcy on your mind, please keep a proper perspective. Focus on what you are doing, when you are doing it. It’s only money. You have more reason now than ever to properly care for yourself – including making sure that whatever you consume is in moderation.

One of the things Congress did before going home was pass the “National Guard and Reservists Debt Relief Act.” I haven’t heard if the President has signed it, but it seems to me he must. This law would exempt certain members of the armed forces from the means test if a bankruptcy petition is filed within 540 days after they complete active duty. I would hope that the same rule would apply WHILE they are on active duty.

I’m glad to see this law being passed. However, I doubt it has much real effect because almost all of these folks would qualify for bankruptcy anyway.

Just a word or two of warning. I am seeing lots of people who are in a panic. They are in the process of losing their homes or jobs or both. The daily news offers little or no comfort. All the “bailout” talk doesn’t include any concrete help for individuals that I can see. This state of mind increases the probability of being in a serious accident or incident. Or such is my personal observation.

I mentioned this in passing while meeting with clients recently. The next time they came in they greeted me as “Nostradamus” – comparing me to the Sixteenth Century prophet or wizard. The type of thing I was talking about had happened to one of them. Sorry about being vague as to exactly what happened, but I need to not break confidentiality. I expressed the hope that it had not been the power of suggestion – the result of an idea that had been planted by me. They were sure it was not.

I bring this up here because I really want to say that I believe we all need to keep the events of the past year or two in perspective. The Romans had a saying – THIS TOO SHALL PASS. It’s a universal truth, and I’m convinced that it certainly applies to our present economic climate. Panic and anxiety always just makes any problem worse. The harder and more difficult times are, the more important it is to take care or yourself. One of my favorite slogans – prominent in a lot of the self-help literature – is abbreviated as “HALT” – don’t let yourself get too Hungry, Angry, Lonely or Tired. A good concept to keep in mind when going through a bankruptcy or any other crisis.

On several of my web pages I talk about how easy it is go get ahold of me. I wrote most of that a couple of years ago. It has become untrue over the past few months, for which I apologize. Between the clients and the creditors of clients, my voice mail box often fills up. My goal has always been to return my calls within 24 hours. I have of late been unable to be that prompt. If you need me and don’t get me right away, keep trying please. I am around and I do want to talk with you; it’s just that things are really busy right now. I would say that it’s more busy than it was in 2005 right before the new bankruptcy law went into effect.

A few weeks ago I bookmarked an article posted on Twin Cities Daily Planet which indicated that bankrupty filings in Minnesota are up almost 30% for May and June of 2008 as compared to May and June of 2007. I thought it has seemed to be pretty busy around here, but I still thought the percentage was surprisingly high. Had someone told me in January of 2006, right after the “reform” legislation had gone into effect that this was going to happen, I don’t think I would have believed it. The standard wisdom at that time was that bankruptcy lawyers might be about out of business. In fact, many lawyers quit practicing bankruptcy law at that time. The new law was called BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act). In my opinion, the only abuse that was going on was that perpetrated by the credit industry, and the only protection provided was for them and not consumers.

Earlier this week I received a copy of Consumer Bankruptcy News, one of those old fashioned publications that is still printed on paper. In the lower right corner of page 7 was an item stating that nation-wide bankruptcy filings were up 48% in July 2008 as compared to July 2007. There were 94,124 consumer filings in July and 82,770 in June this year. That would be as if everybody in Bloomington, Minnesota and in Duluth Minnesota combined had filed for bankruptcy in June or July. If that keeps up, I would assume that for August it would be as if everybody in Rochester, Minnesota had filed for bankruptcy.

If you should feel a need to come see me to talk bankruptcy, there’s sure no reason to feel alone.

Not long ago it seemed that $20,000 of credit card debt was a lot. I would file a bankruptcy for a person who had that without giving it a second thought. Now, however, as things go in my world, that’s not a lot of debt for most people. Unless the debtor is sick, disabled or hopelessly low income, I would be reluctant to file for someone with such a small debt.

What’s happening is that I rarely see anyone who’s not more than $50,000 in debt, and over $100,000 of consumer credit card debt is common. Once the total of the debt tops $100,000 I tend to ignore how much higher it goes, as my software keeps a running tally of the total. The fact is that for me, and I’m afraid for the whole country, the amount of credit card debt that seems normal is creeping steadily upward.

So the other day when I was reading my mail on a bankruptcy lawyer listserve, I had a bit of a start. One of the emails reminded me that for a Chapter 13 bankruptcy, there is a limit as to how much debt one is allowed to have. I quickly pulled out the most recent Chapter 13 I had filed and checked the balances of the debts, to make sure we had not exceeded the legal limit. Up until that moment it never occurred to me that one day someone will probably walk into my office with consumer debts in excess of the Chapter 13 limits. All of a sudden, those limits don’t seem as high to me as they used to. A lawyer who files a case where the limits are exceeded is subject to sanctions. If I did that it could cost me thousands of dollars. I must start paying more attention to those limits.

In order to qualify for a Chapter 13 bankruptcy, the person’s secured debt must not exceed $1,010,650 and the unsecured debt must not exceed $336,900. The way things are going right now, I would not be surprised to meet someone within the next week whose debts are over those limits. From my perspective the current economic downturn has been frightening and unbelievable.

I don’t mean to imply that I have never met a person with debts that high. Back in the early 1980s, during a serious recession we had in those years, I did a Chapter 7 bankruptcy for a real estate developer who had gone out of business and who had millions of dollars in debt. There’s no limit to the amount of debt you can run through a Chapter 7. I have also done Chapter 7 work for small business owners who’s debts would have exeeded the Chapter 13 limits.

But now people I see with consumer debt are actually starting to push those Chapter 13 limits, and that is something I have never seen before.

My email today brought me a notice that the U.S. Trustee’s office is resuming debtor audits as of today. They stopped in January because Congress didn’t fund it.

An audit in this context involves the U.S. Trustee’s office hiring an outside accounting firm to go over the debtor’s records. Previously the policy was that one in 250 cases would randomly be audited. Now the policy is one in a thousand will be audited. That’s a 400% improvement, but I’m still sad to see this stuff starting again.

Since the passage of the “new law” in October of 2005, there have been rules based on level of income about who can file a Chapter 7 Bankruptcy. Unless you are at or below the median income for the State of Minnesota based upon your family size, you can only file a Chapter 7 if you pass the so-called means test. The means test is a whole other topic, which I will have to deal with some other time. For now, however, here’s a video I posted recently on Youtube where I discuss the median income levels for Minnesota by household size.

The numbers are subject to change every few months, but I have them posted on my site on my Chapter 7 page under the subheading of “Qualifying for Chapter 7 in Minnesota.”

Rambling in front of the video camera the other day, it was not long before I got on the subject of how unethical, illegal, fraudulent and criminal it is to attempt charging attorney fees for a bankruptcy on a credit card – with the intent of getting rid of the credit card debt in that bankruptcy. If you run up a debt intending to list it in a bankruptcy, that is fraud. It can be grounds to have a particular debt not discharged in your case; or it could be grounds to have the entire bankruptcy thrown out. Worse yet, it’s fraud and could be prosecuted as a felony. Here’s what I said about it on Youtube:

Most of my clients are good Minnesota people who would rather do anything but come and see somebody like me. They tend to keep trying to figure out how to manage their debt on their own, when they are way past due for a Chapter 7 or Chapter 13 bankruptcy. If you have between fifteen minutes and half an hour, call me (952-544-6356) and at no cost to you I can do a screening over the phone which should give us a fairly good idea of whether you should be filing a bankruptcy and whether it should be a Chapter 7 or a Chapter 13.

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I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.

Located across I-394 from Ridgedale in Minnetonka. Serving the Minneapolis and St. Paul area, with easy access from the western suburbs including St. Louis Park, Golden Valley, New Hope, Crystal, Hopkins, Eden Prairie, Maple Grove, St. Michael, Waconia, and Plymouth. Also available by appointment only at 8421 Wayzata Blvd., second floor conference room, St. Louis Park, MN 55426.